G7 agrees to end coal finance and accelerate phase out of coal power
Leaders from the world’s largest developed economies took significant steps to end coal power generation, demonstrating that momentum on phasing out coal continues to build ahead of the UN Climate Summit COP26 in Glasgow in November.
In a statement released last week, the G7 leaders agreed to an end to new direct government support for unabated[1] coal-fired power stations abroad by the end of 2021 and accelerate the transition away from unabated coal capacity in line with 2030 climate targets and net zero commitments. Their statement will provide an important boost to international efforts to “consign coal to history” at the COP26 summit later this year and should encourage all major economies, especially G20 members, to take the necessary steps, so that the world can phase out coal by 2040 globally, and by 2030 in advanced economies.
The leaders harnessed the growing global momentum in support of United Nations Secretary-General António Guterres’ calls for no new coal, an end to coal finance, and a more rapid phase out of existing coal plants. Their statement reflects shared concern about the severe impact of coal power generation on the climate, and a shared belief that transition away from coal must accelerate.
Jonathan Wilkinson, Canada’s Environment and Climate Change Minister and Co-Chair of the Powering Past Coal Alliance said:
“Ending financing for coal-fired electricity globally is moving markets towards renewable electricity and a healthier future. Investments in cleaner sources of electricity are cost competitive, provide many health benefits, and align with the goals of the Paris Agreement. As co-chair of the Powering Past Coal Alliance, Canada is pleased with this significant commitment by G7 countries towards phasing-out coal-fired power around the world.”
When G7 Climate and Environment Ministers made this commitment in May, COP26 President-Designate Alok Sharma said:
End to coal finance pledge
The G7 commitment on ending coal finance includes Japan – the world’s second-largest financier of coal power overseas so far, and follows similar pledges from the third largest coal financier South Korea and the Asian Development Bank announced in the last few weeks. Together, they provide strong evidence for the accelerating shift away from financing coal power across Asia. They also increase the pressure for a similar commitment from China – the last major funder of overseas coal projects.
The shift in finance reflects an increasing rejection of new coal power by developing countries in the region, including policy changes flagged by governments in Vietnam, Indonesia and Bangladesh, and a full moratorium on new coal plants in the Philippines. These changes result from the fact that coal power projects pose a substantial risk of locking developing countries into high-emission pathways that cannot meet the goals set by the Paris Agreement, and of creating stranded assets that become unprofitable before the end of their lifetimes.
Coal power phase-out
The G7 leaders have also committed domestically to rapidly scale-up technologies and policies that further accelerate the transition away from unabated coal capacity, so that power systems can be ‘overwhelmingly decarbonised’ in the 2030s. This is a powerful response to the recent blockbuster IEA Net Zero by 2050 Roadmap for the Global Energy Sector, which showed that all countries need to immediately stop construction of any new coal power plants, and phase them out completely by 2040 globally, and by 2030 in advanced economies.
Leaders also recognized that the transition must go hand in hand with policies and support for a just transition for affected workers, and sectors so that no person, group or geographic region is left behind. They acknowledged the need for support to deliver this—welcoming work by the Climate Investment Funds, and plans by Canada, Germany, the United Kingdom and United States to commit up to $2 billion in the coming year to its Accelerating the Coal Transition and Integrating Renewable Energy programs.
Several high-level meetings this year, including September’s UN General Assembly and High-level Dialogue on Energy, the October G20 summit and finally COP26 in November, constitute good opportunities for leaders to set coal exit dates in line with the science. G7 climate and environment ministers have recognised the work of PPCA members in helping countries identify and implement solutions to accelerate their phase out efforts.
